Page Industries Struggles To Recover From Lingering Innerwear Demand Slump
The owner of the Jockey brand isn't seeing material uptick in demand, say analysts.
Page Industries Ltd.—owner of the Jockey brand—is struggling to clear out its existing stock due to prolonged weakness in demand, raising concerns over a possible delay in the company's recovery.
"Demand pressures appear to be stabilising but the timing of full recovery remains uncertain, especially in normalising the inventory level," according to Chief Financial Officer Deepanjan Bandyopadhyay.
Within the high-channel inventory, no price hike is expected, even as yarn prices have experienced some inflation in the last few months, Bandyopadhyay told Motilal Oswal Financial Services Ltd. analysts in a recent interaction.
The country's biggest innerwear firm, holding 20% market share in the men's branded category, reported a 5% year-on-year decline in revenue in the last five quarters, with inventory levels still exceeding the desired levels.
Page Industries' performance highlights for nine months of FY24. (Source: Investor Presentation)
However, the company isn't seeing a material uptick in demand, say analysts.
India's innerwear and athleisure industry experienced a resurgence in demand after the Covid-19 pandemic, as consumers sought comfortable clothing while working from home. However, with people gradually returning to the office a year later, the demand for athleisure decreased, leading to an accumulation of excess inventory for the likes of Jockey, Rupa, Dollar, and Lux. Sales were further impacted as consumers redirected their spending towards travel and leisure activities.
The men's underwear index, a concept developed by former US Federal Reserve chairman Alan Greenspan in the late 1970s, is an economic indicator to gauge consumer confidence. Simply put, an uptick in the sales of men's underwear is typically viewed as a signal of a healthy economy.
"The current outlook is not so buoyant, and we are very, very cautious," VS Ganesh, managing director at Page Industries, said during a post-earnings call in February. "Inventories across categories have been high, but as we can see, it is highly pronounced in the case of the athleisure category."
Subdued demand and lower-than-expected revenue growth put pressure on Page Industries’ operating margin. In the nine months of fiscal 2024, the company's Ebitda margin stood at 19.7%.
Initial checks suggest that the recovery has been marginal during the last 3–4 weeks, according to Motilal Oswal. "We will monitor the demand in the next 60–90 days," it said, adding that revival is crucial for the industry during the April–June quarter to help decrease high inventory levels.
With the uptick in demand, the brokerage expects Page Industries to see a gradual inventory correction. "Inventory should normalise post-Q1 FY25."
Motilal Oswal expects Page’s revenue to grow at a 14% CAGR over FY24–26 and sustain an Ebitda margin of 20% for FY25 and FY26, considering stability in raw material prices.
Page’s target demographic includes individuals with an annual income of over Rs 5 lakh. On average, these consumers buy four clothing items annually, with a typical purchase consisting of two bottoms and two tops. This results in a total market size of 720 million pieces per year.
